I've been doing a lot of thinking lately on most of everything that's been greatly discussed across crypto communities.
Oftentimes, I let myself explore these topics so as to find potential solutions to write about.
One thing I've noticed throughout this year alone is that when it comes to L1 developments, nobody seems to really know where the focus should be.
We literally now have people of the opinion that L2s should be straight up blacklisted by L1s in a bid to function as a business maximizing profits.
We've discussed scaling so much over the years that it's all beginning to sound like a problem we keep chasing that doesn't really exist.
I mean, Ethereum has been heavily reported to have a fee problem but this is beginning to feel like a false assessment.
Not that the fees don't exist but that there's a design flaw in L1s that could easily be avoided.
Ethereum's fee problem is something I've personally covered many times(I guess you can say I'm part of the problem?), and the rise of layer 2 solutions, which were meant to solve that too.
In light of recent poor ETH price performance, people began attacking L2s, highlighting that it has pulled liquidity and revenue away from Ethereum.
Now, it is important to note that a lot of things can be true at the same time and right now, what's true is that L2s have indeed pulled liquidity away from Ethereum, and that has also impacted its revenue.
That said, what doesn't quite feel true anymore is that Ethereum had a fee problem that needed “scaling” in the way that it has been approached over the years.
It all just seems to me that we've just had a poor design and understanding of how blockchains should function to power the business and consumer market.
What even is Ethereum's fee problem?
Ethereum's fee problem refers to the high and unpredictable transaction costs, commonly known as gas fees, which users must pay to execute operations on the Ethereum network. — ChatGPT.
One thing should be clear to anyone, if a blockchain is low cost and block builders aren't well compensated in other ways, someone is definitely running an expensive scam that can only last so long.
Blockchain is a decentralized digital ledger that records transaction data that is secure, transparent and tamper-proof.
This means that the network of participants on each chain have three jobs, namely: keeping the chain secure, ensuring transparency(essentially making records publicly accessible) and keeping records tamper-proof and this is usually where the fundamental capital risks come in.
That is, network participants cannot manipulate the records as that usually involves committing capital to the network through stake, for PoS chains.
L1s as storage solutions
I know, when I say “storage solution” it sounds so not like a blockchain, right?
But you see, that's fundamentally what a blockchain is and what L1s should aim to be entirely. It's a storage of data, where a piece of code that enables it happens to be considered a currency by humans.
Every transaction is a transfer of data and every block is like a data folder. Think about your file manager and the different folders holding various data within, well, that's what a blockchain is.
That being said, L1 blockchains have to focus on this and this alone.
This means that everything should be about offering the best storage solution on the fundamental level. This simplified approach makes it easier to deploy the right solutions and essentially solve the revenue and fee problem.
To elaborate, the fee problem of L1s like Ethereum is just a consequence for bad design for storage pricing because the network does not really think of transactions as demand for storage space and that's a huge problem.
Increased storage demand(general count) should not result in base fee increases, what should lead to a fee increase is if individual TXs demand more storage than a regular transaction should need.
I certainly don't need 10MB storage to send $100 to a friend's address do I?
But if I'm trying to send a TX with 2.5 million words of content, that should certainly require more than 10MB, theoretically.
As such, what my TXs fees are should generally be reflective of the amount of storage am demanding, not because I'm demanding the storage alongside 1,000 other people.
Our collective demand does not change what the storage should be worth, the transition to decentralized systems was meant to eliminate exploits of this nature.
The only scaling L1s should be doing would be improving its technology to support higher TPS and not fees because that shouldn't even be a problem in the first place if the system applies fixed costs based on storage demand per transaction.
If you think about it, feeless chains like Hive are quite uniquely positioned to never have a fee problem because TXs rights being pegged to stake makes it easier to enforce a fixed resource cost which businesses, users and applications can conveniently pay for.